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Non –indexation of assets sold prior to 01-06-2016 in IDS-2016

CBDT issues yet another clarification on the Income Declaration Scheme (‘IDS’), clears air on making declaration with respect to sale made prior to June 1, 2016 of capital asset acquired out of undisclosed income and sale proceeds held in cash.

Instances have been brought to the notice of the Board that some taxpayers are of the view that if a capital asset acquired out of undisclosed income is sold before 01.06.2016 and the sale proceeds so received are held in cash, then the amount of undisclosed income required to be declared under the Scheme shall be the amount of undisclosed income invested in acquisition of such capital asset as increased by the capital gain arising on sale of such asset determined in accordance with the provisions of the Income-tax Act, 1961 (i.e.sale consideration less indexed cost of acquisition).

Clarifying the position, the Board has clarified that as per the provisions contained in section 183(2) of the Scheme that where the income chargeable to tax is represented in the form of investment in any asset, the fair market value of such asset as on 01.06.2016 shall be deemed to be the undisclosed income for the purposes of the Scheme. In this context, it may be noted that cash in hand is an asset for the purposes of the Scheme.